Women may need extra help toward financial security

Around the world and throughout the year, thousands of events honor women's achievements. Yet, women still face challenges in many areas of life — such as their financial situations. So if you're a woman, you may want to use this occasion to consider steps you can take to help move toward your important financial goals, such as a comfortable retirement.

First of all, be aware of the potential obstacles facing women: lower earnings than men, longer lifespans than men and more time out of the workforce than men. This last element is particularly important, because when women leave the workforce for extended periods, typically to care for young children or older parents, they will have much less time to contribute to their 401(k) or another employer-sponsored retirement plan.

Whether you fit the above profile perfectly or not, and whether you're married or single, you must take action on your own behalf. Here are some suggestions:

Here are some suggestions:

•Ramp up your retirement plan contributions. Contribute as much as you can afford to your 401(k) or other employer retirement plan. Your 401(k) is a good way to build retirement savings because your earnings accumulate on a tax-deferred basis, which means your money can grow faster than if it were placed in an investment on which you paid taxes every year. (You will have to pay taxes on withdrawals; also, withdrawals prior to age 59 1⁄2 may be subject to a 10 percent IRS penalty.)

•Contribute to an IRA. Even if you have a 401(k) or similar plan, you're probably still eligible to open an IRA. Contributions to a traditional IRA may be tax-deductible, while earnings can grow tax deferred. If you invest in a Roth IRA, your contributions are not deductible, but any earnings growth is distributed tax-free, provided you've had your account at least five years and don't start taking withdrawals until you're 59 1⁄2.

•Don't invest too conservatively. Some studies show that women may invest more conservatively than men. This could be a problem, especially since, as mentioned above, women are also out of the workforce longer and may have fewer years to contribute to their 401(k plans. Consequently, when you invest in your 401(k), IRA or other accounts, consider including in your holdings growth-oriented vehicles consistent with your risk tolerance, such as stocks. Stocks are more susceptible to market volatility, but you can help reduce the impact of this volatility by owning a mix of investments, including stocks, bonds and cash.

•Talk to your spouse about Social Security. If your spouse starts collecting Social Security at 62 (the earliest age of eligibility), the monthly benefits could be reduced, perhaps by as much as 25 percent. This reduction could affect you if you ever become a widow, because once you reach your own "full" retirement age (which will likely be 66 or 67), you may qualify for survivor benefits of 100 percent of what your deceased spouse had been receiving — and if that amount is reduced, you'll get a reduced benefit. Talk to your spouse about this issue well before it's time to receive Social Security.

By making the right moves through some extra steps, you will find yourself on the road to financial freedom. 

Edward Jones wrote this article for use by your local Edward Jones Financial advisor.

This article originally appeared on Crestview News Bulletin: Women may need extra help toward financial security